Last year, the “breakeven” rate at which US 10-year inflation-linked bonds (known as Tips) would offer the same return as fixed-income treasuries dipped below 0.1 per cent. This implied there would be virtually no inflation at all, on average, over the next decade. Breakeven rates also implied there would be outright deflation over the next five years. Nothing like this had happened since the Depression of the early 1930s.

If there was any inflation at all, this meant that Tips would outperform. Many seem to have bought them on this basis, as Tips now imply an inflation rate of 1.1 per cent for the next 10 years. This is very low, but is its highest in four months.

Meanwhile the real yield on conventional US treasury bonds (obtained by subtracting the current inflation rate from the nominal yield) is 2.8 per cent, the highest in two years. That is in part due to low headline inflation. However this figure does make it harder to believe that US bonds are in a bubble.